02-11-2021 SPECIAL JOINT FINANCE COMMITTEE PACKET

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The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity Request for Action To Joint Finance Committee Item Number 4.1 Agenda Section General Business Meeting Date February 11, 2021 Prepared by Colleen Eddy, Economic Development Director Item Description Sportech LLC., Tax Abatement Application Reviewed by Cal Portner, City Administrator Reviewed by Action Requested Consider and provide a recommendation on a property tax abatement application for Sportech LLC. Background/Discussion The city received an application from Sportech LLC for tax abatement financial assistance for a portion of the development costs related to the construction of a 91,050sf building expansion. Sherburne County also received a tax abatement application which they will consider at their February 16, 2021, meeting. The applicant is proposing an expansion to their building located at 10752 168th Circle for continued business growth and expansion of company operations. The project is expected to retain the existing 323 employees and create a minimum of 85 new FTE employees within three years of completion. The average wage of new jobs is projected to be $18.20/hr, and $23.04 (with benefits) which meet s the city business subsidy policy provisions. Tax Abatement The county assessor estimated the expansion’s taxable value at $2,825,000. The value increase would account for a city tax share over a 15-year term to be $388,800. The maximum amount available for this project for the remaining 14 years of the existing abatement is approximately $362,880 for the years 2023-36. Aligning the level of assistance to the availability of projected revenues provides a method of financing a portion of the project costs and allow the public participation for the project to remain at a reasonable level, while meeting the city’s tax abatement and business subsidy policy objectives. Financial Impact The owner, Meritex, proposes an $2,825,000 million project funded through private funds, owner cash equity and city and county tax abatement of $769,875 for up to 15 years. The city’s share of tax abatement as requested over 15 years is approximately $388,800 and would constitute as a business subsidy due to the proposed amount. The maximum amount of abatement assistance pursuant to the terms of the existing abatement (for which this project would be part of) is $362,880 over 14 years. Mission/Policy/Goal The purpose of the tax abatement assistance is to provide financial and technical assistance for the creation and retention of new employment to an existing business located in the community. Attachments